Senate debates

Monday, 4 December 2006

Medibank Private Sale Bill 2006

Second Reading

5:52 pm

Photo of Michael ForshawMichael Forshaw (NSW, Australian Labor Party) Share this | Hansard source

I rise to oppose the Medibank Private Sale Bill 2006, which would lead to the sell-off of Medibank Private. In doing so, I endorse the opposition senators’ report, as part of the report by the Senate Standing Committee on Finance and Public Administration into the Medibank Private Sale Bill. Indeed, I am a signatory to the opposition senators’ report, being the deputy chair of that committee. I do not want to take up the time of the Senate this evening by going through in detail the arguments advanced in the opposition senators’ report: they are there, they are straightforward, I believe they are persuasive and I would ask that senators read that report. I believe that, if they read it in good faith, they will understand the reasons that this bill should be opposed. However, I think it is important to comment upon a number of the key issues in this debate—issues that have been addressed in the opposition senators’ report.

The first one is that there is serious doubt about the government’s right to sell Medibank Private. This question has been debated at some length and in some detail. The fact that that debate has occurred demonstrates that this is not a straightforward issue. The government would have it that Medibank Private, the health fund, is owned by Medibank Private Ltd and, further, that Medibank Private Ltd is a company which is wholly owned by the government. Therefore, they being the sole shareholder, they can sell off the asset or the company. That is a neat argument, but it has some serious flaws. The first flaw is that it misrepresents the real nature of Medibank Private.

I think Senator Kirk, in her excellent speech a moment ago, addressed this aspect when she referred to the fact that Medibank Private is a not-for-profit health fund. It is Australia’s largest health fund. It was established many years ago by a Labor government as an integral part of the holistic approach to health coverage in this country: you have Medicare—or its predecessor, Medibank—and you have Medibank Private. I know that the previous Liberal government under Malcolm Fraser was involved in the reconstruction of the original Medibank, but the real position is that Medibank Private, together with Medicare, provides a system of health coverage for a large number of Australians. So Medibank Private had its genesis in the changes in the Whitlam government years. It brought about a system of universal coverage of health costs for Australians.

Being a not-for-profit health fund, the issue arises as to who the owners are. On the one hand, the government say they own the company that holds the shares and therefore they are the sole owner—and therefore they can sell it. But, when you look into it more deeply, you have to take account of the fact that the very foundation of Medibank Private is its membership. As I said, it has the largest membership of any health fund in this country. And what are the assets of that fund? The assets of that fund are its revenue derived from premiums and its revenue that is held in reserve. In that context, it is important to understand that—as the opposition senators’ report sets out—the beneficial owners of Medibank Private are the members. They look to that fund and to the reserves of that fund to continue to provide them with the coverage of their health costs that are not covered by Medicare, particularly, obviously, hospital insurance coverage and ancillary cover.

I should say at this point that I am a member of Medibank Private. I have family coverage in the fund and I have been a member of Medibank Private for many, many years—pretty much from the time when I was at an age and of a status that I needed and decided to take out health insurance. My point in this debate is, as the opposition senators’ report points out, that, when you look at the structure of Medibank Private, in reality, rather than owners being the shareholders of the company Medibank Private Ltd, the owners are the members of the fund. The reserves are there if they are needed to be called upon to cover the contingency for future claims against the fund. This is a not-for-profit fund. This is a not-for-profit company. It does not set out to make a profit. It does not set out to declare a dividend. In that context, for the government to blandly state that ‘on paper we are the owner because we hold all the shares in Medibank Private Ltd and we can therefore sell this company off’ is to disregard the interests of millions of Australians and their families.

At the very least, the members have a beneficial interest. They certainly have, I believe, at law an equitable interest—and there is conflicting advice as to the legal status of this sell-off. The government relies upon advice from the department of finance that they can sell, but alternative advice has been put forward by reputable persons and organisations that that is not the case. That is a question that I believe is unresolved and that may well have to be tested at law if this legislation passes this chamber and the parliament. I will leave it at that point, but I think it is not appropriate—it is starting out from the wrong premise—to pass a law that has a serious legal question hanging over it. It may well be for the courts to determine that issue if this legislation is passed.

The second point I want to make in regard to this sell off is to actually pick up on a couple of the interjections that were made by the Minister for the Arts and Sport, Senator Kemp. The argument is always put by the government whenever we debate legislation that deals with privatisation—it was said when we debated Telstra—that the Labor Party in government sold Qantas and they sold the Commonwealth Bank. I have responded to that argument on previous occasions, and I will do so again tonight. The test as to whether or not it is good public policy to privatise government owned assets or government owned services—and I stress the word ‘services’—is whether or not it is appropriate in the market that that government owned corporation or service operates. Of course the big distinction here is that Medibank Private operates in a market which is about delivering health insurance, which is essentially a not-for-profit system.

As has been said by Senator Kirk and others, Medibank Private is a not-for-profit fund. This is not a market where even the other private funds that operate in the health sector do so on the basis of endeavouring to make profits and deliver profits back to shareholders. That is why nearly all of them are mutuals or companies established under similar arrangements. That stands in stark contrast to the situation that operated for the Commonwealth Bank and Qantas.

The government can try to score cheap political points on this, but I have always maintained that, when it came to Qantas, it was operating in a market that was essentially providing a service to a small proportion of the population—those that chose to fly on aeroplanes either domestically or overseas. I think that probably accounts for about five per cent of the population. They were competing against private sector companies that were operating for a profit, both domestically and internationally. The same was true of the great Commonwealth Bank. It was set up by the Chifley government but at the time that it was sold it was operating in a market where it was competing against all those other banks that were operating for a profit to deliver returns back to shareholders. Again, it was operating in a market where it did not necessarily have, by the time it was sold, a huge advantage over the other banks. My recollection is that it was actually not the biggest bank in Australia by that stage. It was certainly being challenged by the National Australia Bank and by Westpac.

I always point out that there is a distinction between the privatisation of those two government owned entities, as they were at the time, and entities such as Telstra, Medibank Private and Australia Post—which I believe could well be the next cab off the rank if this government wants to continue down this road—because in each of these latter cases the government owned entity has provided a service which is either delivered to just about every Australian and their family or, in the case of Medibank Private, delivered in a not-for-profit sector.

The health of all Australians is not a market that operates like all other markets. It does not operate as a for-profit market. The biggest financial contributor to the health of all Australians is government. It underwrites the cost of health care in this country through Medicare, through the PBS, and through the budgetary expenditure on all those other aspects of health such as hospitals and so on. That is the market that Medibank Private operates in.

You cannot argue that somehow Medibank Private can be sold off like other government-owned entities in the past, such as the Commonwealth Bank and Qantas. It is a totally different scenario. On that basis I think there is a special case here—just as there is with Australia Post and just as we argued with Telstra—that at the end of the day the nation and the Australian people benefit from government ownership of these enterprises.

I will mention a couple of other points. The government claim that the sale of Medibank Private will have a beneficial impact on premiums. Frankly, there is just no evidence for that whatsoever. It is simply a belief of the government. I do not even think they necessarily believe it. I think the motivation here is more ideological rather than anything founded on a firmly held belief. It is a mere assertion.

The government has a pretty poor track record when it comes to making assertions about what will happen in the health sector in this country. We should remember that it was this government that told us that the Medicare safety net was affordable. The Minister for Health and Ageing, Mr Abbott, put his hand on his heart and said that it would never have to be altered because it was affordable and that all those arguments put about that it would lead to a blow-out in costs were just, in his view, nonsense. Of course, he was proved dramatically wrong. Within a short space of six to 12 months he was proved totally wrong and had to apologise to the Australian people—probably one of the few apologies this government has ever made to the Australian people—and introduce changes to the Medicare safety net scheme because of the blow-out in costs.

Equally, the government has stated over the years that its 30 per cent rebate scheme for private health insurance premiums would constrain premium increases in private health insurance. That has not happened. Since this government came into office and since the 30 per cent rebate scheme was introduced, premiums have continued to increase. It has reached the point where the government no longer seriously considers whether or not it should approve an application for an increase; it pretty much ticks it off. So each year, despite this massive subsidy to private health insurance, premiums continue to rise. It is not just premiums that continue to rise but the other ‘under the table’ change that has occurred is that the funds themselves have found ways to reduce the level of refund and put extra restrictions upon their members to obtain those refunds. As a member of Medibank Private I have seen that occur.

The final point I make is this: the government has put this little caveat in the legislation which says that there cannot be any foreign ownership of Medibank Private for five years once it is sold. Big deal! What does that really achieve? That is just a signal to say that, in five years time, this fund can be sold off to any foreign owned investment bank, company, corporation or whatever. We know that there are major multinational companies and investment arms that are eagerly eyeing off this business, if it is sold, and they will wait five years if they have to. That, frankly, is a meaningless caveat.

I believe that we should take note of the comments made by Dr John Deeble to the Senate Standing Committee on Finance and Public Administration. He was the architect of the original Medibank, which is now Medicare. He is a person who understands and contributed so much to the development of our universal health coverage system. We should also take note of the AMA’s serious concerns about this sell-off. We should oppose it.


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